Decisions to Make When Choosing Your Credit Cards
When choosing your credit cards, there are many factors that should be taken into consideration…some are obvious, others aren’t. Still, making the right decisions can save you lots of money over the life of the credit card you ultimately choose, so choose carefully.
Here are some factors to consider when choosing your next credit card:
1. Should I sign up for that new balance transfer credit card or not?
If you have an existing balance(s) on some of your credit cards, and these cards carry a higher interest rate than more current credit card offers, it can be financially beneficial to consolidate those balances onto a single, new credit card offering a lower rate of interest.
One of the easiest ways to save is to find a credit card with a low or even a 0% introductory interest rate on balance transfers. The introductory period can be anywhere from 6 months to two years (the longer the better). Then you simply transfer the balances to the new card and start saving.
But, beware…it’s very important to pay back the full balance within the introductory period, otherwise your interest rate could suddenly balloon to the balance transfer interest rate listed within the terms and conditions of your card.
2. Do I use my credit cards occasionally or regularly?
An important, but often overlooked, factor to consider when choosing your next credit card is the frequency of use…will you use it infrequently (for emergencies, online shopping, etc.), or will you use it regularly (purchases of gas, groceries, and other household goods)?
For example, if you only use your card for online purchases, then a cash back rewards program for shopping at major brick and mortar merchants won’t be very beneficial for you.
Or, if you only use your credit card a few times a year, then you will probably want to avoid paying a high annual fee, but if you are using your credit card daily, then the annual fee won’t be as much an issue (assuming, that is, that the other benefits outweigh the cost of the annual fee).
3. Overseas Use or Not?
Will you be using your card when you travel overseas? If so, make sure that you read the fine print, and choose a credit card with lower charges associated with using overseas ATM machines and for paying for goods and services overseas. (There should be a full list of fees available on the card issuer’s web site.)
4. Will you qualify?
When considering credit cards, before you apply, make sure that you know your credit score, and only choose cards that offer accounts to those individuals within your credit “range.” Factors to consider include your current credit standing, your household income, and your age.
Every credit card company has certain guidelines for credit approval, and knowing these guideline in advance can help you to choose a credit card that you are likely to be approved for, as credit inquiries and denied applications do show up on your credit report and are not at all helpful for your credit status.
5. Can you pay the balance in full every month?
Look at your budget! If you are confident you can pay the balance in full, by a given date, then you can choose a credit card with a good interest-free period that allows you to pay no interest for a period of approximately 45 to 55 days after the date that you use the card. This way, the annual percentage rate won’t matter, as you will never pay any interest on the balance.